The UNIDROIT Principles ofInternational CommercialContracts and theHarmonisation of InternationalSales LawMichael Joachim BONELL* Résumé Abstract Ce texte porte sur les Principes This paper deals with the UNIDROITd’UNIDROIT et l’harmonisation de la Principles and the harmonization ofvente internationale de marchan- international sale of goods. The ﬁrstdises. Dans la première partie, part deals with the problem ofl’auteur traite de la difﬁculté d’en creating a single text governing thearriver à un texte uniforme sur la international sale of goods and withvente internationale de marchan- the ensuing consequences, due todises et des conséquences qui en the existing differences between theont découlé étant donné les diffé- legal, social and economic systemsrences qui existaient entre les systè- of the various countries when themes juridiques, sociaux et économi- Vienna Convention was negotiated.ques au moment de la négociation The author also looks at the inno-de la Convention de Vienne. L’au- vative approach that prevailed forteur étudie également l’approche the writing of the UNIDROIT Principlesinnovatrice qui a prévalu lors de la aimed at developing a text thatrédaction des Principes d’UNIDROIT would apply to all contracts andvisant à promouvoir un texte s’appli- that would represent a reassertionquant à l’ensemble des contrats et of the existence of an internationalreprésentant, non pas une tentative law of contracts rather than and’uniformisation des droits natio- attempt at streamlining the laws ofnaux, mais plutôt une réafﬁrmation various countries. The second partde l’existence d’un droit internatio- deals with the complementarynal des contrats. Dans la deuxième nature of the Vienna Conventionpartie, l’auteur examine la caractère and of the UNIDROIT Principles,∗ Professor of Law, University of Rome I “La Sapienza”, Consultant, UNIDROIT.
336 (2002) 36 R.J.T. 335complémentaire de la Convention de making a distinction between theVienne et des Principes d’UNIDROIT, international contracts governed byet ce, en distinguant les contrats de the Vienna Convention, and thosevente internationaux selon qu’ils that are not.sont régis ou non par la Conventionde Vienne.
Table of ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339I. CISG and the UNIDROIT Principles: International Uniform Sales Law vs “Restatement” of General Contract Law . . . 340II. CISG and the UNIDROIT Principles: Two Complementary Instruments . . . . . . . . . 343 A. International Sales Contracts not Governed by CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 B. International Sales Contracts Governed by CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 1. The UNIDROIT Principles as a Means of Interpreting and Supplementing CISG . . . . . . . . 348 2. UNIDROIT Principles and CISG Side by Side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353
It is no exaggeration to say that both the U.N. Conventions onContracts for the International Sale of Goods (CISG) and the UNIDROITPrinciples of International Commercial Contracts representlandmarks in the process of international uniﬁcation of law. CISG,unanimously adopted in 1980 by a diplomatic Conference with theparticipation of representatives from 62 States and 8 internationalorganisations, has been ratiﬁed by 60 countries from the ﬁvecontinents, including almost all the major trading nations 1. TheUNIDROIT Principles, published in 1994, are likewise a world-widesuccess: translated into over two dozen languages, they are not onlythe subject of a substantial body of legal writings, but areincreasingly being used in international contract practice anddispute resolution2. The present paper will focus on the relationship between CISGand the UNIDROIT Principles in the context of international salescontracts. In particular I shall demonstrate that, far from beingcompetitors, they may indeed complement one another. This is truenot only in cases where CISG is not applicable, but also with respectto sales contracts governed by CISG where the UNIDROIT Principlesmay be used to interpret and supplement CISG. However, before embarking on this analysis, I cannot but stressthe vital role Canada has played in the preparation of both theseinstruments. Two eminent colleagues in particular – Ron Ziegel andPaul-André Crépeau – deserve being mentioned in this respect. RonZiegel, head of the Canadian Delegation to the Vienna DiplomaticConference, was deﬁnitely one of the key ﬁgures in the negotiationsfor the adoption of CISG; on his part, Paul-André Crépeau, was andcontinues to be, also thanks to his unique insight into both commonlaw and civil law systems, a driving force within the Working Groupfor the preparation of the UNIDROIT Principles.1 For the list of the Contracting States, as well as more than 500 cases and an exhaustive bibliography on CISG, see: Internet website [http://www.unilex.info].2 For some 70 decisions referring in one way or another to the UNIDROIT Principles as well as an exhaustive bibliography, see: M.J. BONELL (ed.), The UNIDROIT Principles in Practice (2002).
340 (2002) 36 R.J.T. 335I. CISG and the UNIDROIT Principles: International Uniform Sales Law vs “Restatement” of General Contract Law When back in 1929 Ernst Rabel launched the idea of preparinguniform rules on international sales contracts, it was taken forgranted that the envisaged rules were to be prepared in the form ofa binding instrument. Even after the poor reception of the two 1964Hague Sales Conventions, when in 1968 UNCITRAL decided tomake a fresh start, the legislative option was the only conceivableone3. Yet the option in favour of uniform legislation inevitably res-tricted the drafters’ room for manoeuvre. Due to the differences inlegal tradition and at times, even more signiﬁcantly, in the socialand economic structure prevalent in the States participating in thenegotiations, some issues had to be excluded at the outset fromthe scope of CISG, while with respect to a number of other items theconﬂicting views could only be overcome by compromise solutionsleaving matters more or less undecided. Thus, some categories of sale – among which are also transac-tions of considerable importance in international trade practice,such as sales of shares and other securities, of negotiableinstruments and money, of ships and aircraft – are expresslyexcluded from its scope 4. But also in regard to ordinary salescontracts a number of important issues have not been taken intoconsideration. CISG itself expressly mentions the validity of thecontract, the effect of the contract on the property in the goods5 andthe liability of the seller for death or personal injury caused by thegoods to the buyer or any other person.6 In addition, one may recall,for instance, the conclusion of the contract through an agent, theproblems arising from the use by one or both of the parties ofstandard terms, or the impact which the different kinds of Statecontrol over the import and/or export of certain goods or the3 For a discussion of some of the reasons for this preference, see: M.J. BONELL, An International Restatement of Contract Law, 2nd ed., p. 62 and 63 (1997).4 Art. 2 CISG.5 Art. 4 CISG.6 Art. 5 CISG.
UNIDROIT PRINCIPLES AND HARMONISATION OF INTERNATIONAL SALES LAW 341exchange of currency may have on the contract of sale as such oron the performance of any of its obligations.Of the provisions laying down not too convincing compromisesolutions between conﬂicting views, some openly refer the deﬁniteanswer to the applicable domestic law7. Others use the techniqueof a main rule immediately followed by an equally broad exception,thereby leaving the question open as to which of the two alternativeswill ultimately prevail in each single case 8. Others still hide the lackof any real consensus by an extremely vague and ambiguouslanguage9. The UNIDROIT Principles represent a totally new approach tointernational trade law. First of all, on account of their scope which,contrary to that of all existing international conventions includingCISG, is not restricted to a particular kind of transaction but coversthe general part of contract law10. Moreover, and more importantly,the UNIDROIT Principles – prepared by a private group of expertswhich, though acting under the auspices of a prestigious Institutesuch as UNIDROIT, lacked any legislative power – do not aim to unifydomestic law by means of special legislation, but merely to “re-state”existing international contract law. Finally, the decisive criterionin their preparation was not just which rule had been adopted bythe majority of countries (“common core approach”), but also whichof the rules under consideration had the most persuasive valueand/or appeared to be particularly well suited for cross-bordertransactions (“better rule approach”).7 Cf., e.g., Art. 12 and 96 CISG with respect to the formal requirements of the contract; Art. 28 CISG concerning the possibility of obtaining a judgment for speciﬁc performance; Art. 55 CISG with respect to the possibility of a sales contract being validly concluded without an express or implied determination of the price.8 Cf., e.g., Art. 16 CISG dealing with the revocability of the offer; Art. 39 (1), 43 (1) and 44 CISG as to the notice requirement in case of delivery of non- conforming goods or goods which are not free from third parties’ rights; Art. 68 CISG concerning the transfer of risk where the goods are sold in transit.9 Cf., e.g., the reference to good faith in Art. 7(1) CISG; the deﬁnition of “fundamental breach of contract” in Art. 25 CISG; Art. 78 CISG concerning the right to interest on sums in arrears.10 On the possibility of the UNIDROIT Principles playing the role of general contract law otherwise allotted to a national law, see: M. BRIDGE, The International Sale of Goods: Law and Practice, p. 54 et seq. (1999).
342 (2002) 36 R.J.T. 335 Yet precisely because the UNIDROIT Principles were not conceivedas a binding instrument they could address a number of mattersthat had either been completely excluded or insufﬁciently regulatedby CISG. Thus, in the chapter on formation, new provisions were includedon the manner in which a contract may be concluded, on writingsin conﬁrmation, on the case where the parties make the conclusionof their contract dependent upon reaching an agreement on speciﬁcmatters or in a speciﬁc form, on contracts with terms deliberatelyleft open, on negotiations in bad faith, on the duty of conﬁdentiality,on merger clauses, on contracting on the basis of standard terms,on surprising provisions in standard terms, on the conﬂict betweenstandard terms and individually negotiated terms and on the battleof forms11. Further, a whole chapter on validity was added which moreoveris not restricted to the classical cases of invalidity, i.e. the threedefects of consent such as mistake, fraud and threat, but alsoaddresses the much more controversial issue of “gross disparity”12. Equally new are, among others, the contra proferentem rule, theprovision on linguistic discrepancies and that on supplying anomitted term in the chapter on interpretation13, the provision onimplied obligations in the chapter on content 14; those on paymentby cheque or other instruments, on payment by funds transfer, oncurrency of payment, on the determination of the currency ofpayment where it is not indicated in the contract, on the costs ofperformance, on the imputation of payments, on public permissionrequirements and on hardship in the chapter on performance15; theprovisions on the right to performance, on exemption clauses, onthe case where the aggrieved party contributes to the harm, oninterest rates and on agreed payment for non-performance in thechapter on non-performance 16.11 Cf. U NIDROIT Principles, Art. 2.1, 2.12, 2.13, 2.14, 2.15, 2.16, 2.17, 2.19, 2.20, 2.21 and 2.22, respectively.12 Cf. id., Art. 3.4-3.9 and 3.10, respectively.13 Cf. id., Art. 4.6, 4.7 and 4.8, respectively.14 Id., Art. 5.2.15 Cf. id., Art. 6.1.7-6.1.9, 6.1.10, 6.1.11, 6.1.12, 6.1.14-6.1.17 and 6.2.1 and 6.2.3, respectively.16 Cf. id., Art. 7.2.1-7.2.5, 7.1.6, 7.4.7, 7.4.9 and 7.4.13, respectively.
UNIDROIT PRINCIPLES AND HARMONISATION OF INTERNATIONAL SALES LAW 343II. CISG and the UNIDROIT Principles: Two Complementary InstrumentsA. International Sales Contracts not Governed by CISG Notwithstanding the world-wide acceptance of CISG, theremight still be sales contracts not governed by CISG. According toArticle 1 CISG, this is the case whenever at least one of the partiesis not situated in a Contracting State or the rules of privateinternational law of the forum lead to the application of the law ofa non-Contracting State. In all such cases the UNIDROIT Principlesmay be applied as an alternative set of internationally uniformrules, either because of an express choice to this effect by theparties themselves or because the contract is governed by “generalprinciples of law”, “lex mercatoria” or the like, and the UNIDROITPrinciples are considered to be a particularly authoritativeexpression thereof. In actual practice, more and more cases are being reported inwhich the UNIDROIT Principles have been applied as lex contractusof international sales contracts which do not fall within the scopeof CISG. In one case the parties themselves had expressly chosen theUNIDROIT Principles as the law governing their contract 17. The caseconcerned a sales contract entered into between a Hong Kong exportcompany and a Russian trade organisation. The contract did notcontain any choice of law clause, but when the dispute arose, theparties agreed that the Arbitral Tribunal should apply the UNIDROITPrinciples to resolve any questions not expressly regulated in thecontract. In two other cases the UNIDROIT Principles were applied evenwithout any express reference to them by the parties. One is the ICC Award No. 850218 concerning a contract for thesupply of rice entered into between a Vietnamese exporter and17 See: Award No. 116 of 20 January 1997 rendered by the International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation (for an abstract, see: M.J. BONELL (ed.), op. cit., note 2, p. 481).18 ICC Award No. 8502 of 1996, ICC International Court of Arbitration Bulletin 72- 74.
344 (2002) 36 R.J.T. 335French and Dutch buyers. The contract did not contain any choiceof law clause. The Arbitral Tribunal decided to base its award on“trade usages and generally accepted principles of internationaltrade” and to refer “in particular to the 1980 Vienna Convention onContracts for the International Sale of Goods (Vienna SalesConvention) or to the Principles of International CommercialContracts enacted by U NIDROIT, as evidencing admitted practicesunder international trade law” (emphasis added). The individualprovisions it then referred to were Articles 76 CISG and 7.4.6 (Proofof harm by current price) of the UNIDROIT Principles. Yet another example is the award rendered by an ad hoc ArbitralTribunal in Buenos Aires in 199719. The case concerned a contractfor the sale of shares between shareholders of an Argentinecompany and a Chilean company. The contract did not contain achoice of law clause and the parties authorized the Arbitral Tribunalto act as amiable compositeur. Notwithstanding the fact that bothparties had based their claims on speciﬁc provisions of Argentinelaw, the Tribunal decided to apply the UNIDROIT Principles. TheTribunal held that the UNIDROIT Principles constituted “usages ofinternational trade reﬂecting the solutions of different legal systemsand of international contract practice” (emphasis added), and that assuch, according to Article 28(4) of the UNCITRAL Model Law onInternational Commercial Arbitration, they should prevail over anydomestic law20. The individual provisions of the UNIDROIT Principlesapplied to the merits of the case were Articles 3.12 (Conﬁrmation),3.14 (Notice of avoidance) and 4.6 (Contra proferentem rule). Yet it is particularly in the context of so-called “State contracts”that the UNIDROIT Principles are frequently applied even in theabsence of an express reference by the parties. A ﬁrst example is provided by the ICC Partial Awards in CaseNo. 7110 21. The dispute concerned contracts for the supply ofequipment concluded between an English company and a Middle19 Award of 10 December 1997 (for an abstract, see: M.J. BONELL (ed.), op. cit., note 2, p. 463).20 Art. 28(4) provides that “[i]n all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.”21 For abstracts of the three partial awards rendered in 1995, 1998 and 1999 res- pectively, see: (1999) 10, no 2 ICC International Court of Arbitration Bulletin 39-57.
UNIDROIT PRINCIPLES AND HARMONISATION OF INTERNATIONAL SALES LAW 345Eastern governmental agency. While most of the contracts weresilent as to the applicable law, some did refer to settlementaccording to “rules of natural justice”. In a ﬁrst partial awarddealing with the applicable law, the Arbitral Tribunal, by majority,held that the parties had intended to exclude the application of anyspeciﬁc domestic law and to have their contracts governed bygeneral principles and rules which enjoy wide internationalconsensus. According to the Arbitral Tribunal such “general rulesand principles […] are primarily reﬂected by the UNIDROIT Principles”(emphasis added), and in the other partial awards dealing withsubstantive issues it referred to Articles 1.7 (Good faith and fairdealing), 2.4 (Revocation of offer), 2.14 (Contracts with termsdeliberately left open), 2.18 (Written modiﬁcation clause), 7.1.3(Withholding performance) and 7.4.8 (Mitigation of harm) of theUNIDROIT Principles, considering them all to be expressions ofgenerally accepted principles of law. Other examples are ICC Awards No. 7375 and No. 8261 relatingto contracts for the supply of goods between a United Statescompany and a Middle Eastern governmental agency22, andbetween an Italian company and another Middle Easterngovernmental agency23, respectively. In both cases the contractswere silent as to the applicable law. The Arbitral Tribunal, assumingthat neither party was prepared to accept the other’s domestic law,decided in the ﬁrst case to apply “those general principles and rulesof law applicable to international contractual obligations [...],including [...] the UNIDROIT Principles, as far as they can be consideredto reﬂect generally accepted principles and rules” (emphasis added),while in the second it declared that it would base its decision on the“terms of the contract, supplemented by general principles of tradeas embodied in the lex mercatoria” and eventually applied someindividual provisions of the U NIDROIT Principles with no furtherexplanation. Finally mention may be made of ICC Award No. 736524. Thecase concerned contracts for the delivery of sophisticated military22 ICC Award No. 7375 of 5 June 1996: cf. (1996) 11 Measley’s International Arbitration Report A-1 et seq.; (1997) Unif. L. Rev. 598.23 ICC Award No. 8261 of 27 September 1996 (for an abstract, see: M.J. BONELL (ed.), op. cit., note 2, p. 443).24 ICC Award No. 7365 of 5 May 1997 (for an abstract, see: M.J. BONELL (ed.), op. cit., note 2, p. 491).
346 (2002) 36 R.J.T. 335equipment, entered into in 1977 between a U.S. corporation and theIranian Air Force. The contracts contained a choice-of-law clause infavour of the law of the Government of Iran in effect at the date ofthe contracts, but when the dispute arose the parties eventuallyagreed to the supplementary application of “general principles ofinternational law and trade usages”. The Arbitral Tribunal declaredthat as to the contents of such general principles and rules it wouldbe guided by the UNIDROIT Principles and indeed, when deciding themerits of the case, on a number of occasions based its solutions,exclusively or in conjunction with similar rules to be found inIranian law, on individual provisions of the U NIDROIT Principles suchas Arts 5.1 - 5.2 on express and implied obligations, 6.2.3(4) (Effectsof hardship), 7.3.6 (Restitution) and 7.4.9 (Interest for failure to paymoney). It is worth noting that the award was challenged by the U.S.corporation before the District Court, S.D. California precisely onthe ground, among others, that the Arbitral Tribunal, by resortingto the UNIDROIT Principles, whereas the parties had only referred to“general principles of international law” as the rules applicable tothe substance of the dispute, had exceeded the scope of thesubmission to arbitration thereby violating Article V(1)(c) of the1958 New York Convention on the Recognition and Enforcement ofForeign Arbitral Awards. However the Court expressly rejected thisargument, thereby conﬁrming the Arbitral Tribunal’s implicitassumption that the UNIDROIT Principles represent a source of“general principles of international law and usages” to whicharbitrators may resort even in the absence of an expressauthorisation by the parties25.B. International sales contracts governed by CISG On account of its binding nature, CISG will normally takeprecedence over the UNIDROIT Principles whenever the requirementsfor its application are met. It is true that according to Article 6 CISG parties may excludethe Convention wholly or in part. While there may be cases where25 Cf. Ministry of Defence and Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Defense Systems, Inc., 29 F.Sup.2d 1168; for a comment, see: Michael Joachim BONELL, “A Signiﬁcant Recognition of the UNIDROIT Principles by an United States Court”, (1999) Unif. L. Rev. 651.
UNIDROIT PRINCIPLES AND HARMONISATION OF INTERNATIONAL SALES LAW 347parties choose to replace individual Articles of CISG by thecorresponding provisions of the U NIDROIT Principles which theyconsider to be more appropriate, an exclusion of CISG in its entiretyin favour of the UNIDROIT Principles is, at least for the time being,rather unlikely. As a matter of fact, parties do quite often excludeCISG, but this is generally because they are afraid of theuncertainties surrounding the application of any novel instrument.In such cases, they will prefer the safety of domestic law rather thanventure into the application of something as novel as the UNIDROITPrinciples, whatever their intrinsic merits. It remains to be seen, however, what will happen if the parties,either because they are not aware of the existence of CISG, orbecause they do not know that their contract falls within the scopeof application of CISG, refer to the UNIDROIT Principles as theapplicable law, without expressly excluding CISG. The view hasbeen expressed that such reference is tantamount to a tacitexclusion of CISG as a whole, just as occurs, for example, if theparties choose the law of a non-Contracting State or refer toprinciples and rules typical of the non-uniﬁed domestic law of anyState, whether or not a party to CISG26. This argument, however,is difﬁcult to accept. There is not the same degree of incompatibilitybetween the UNIDROIT Principles and CISG as exists between CISGand the domestic law of whichever State: on the contrary, they areboth instruments of international origin which, apart from theirdifferent scope, at most differ in speciﬁc provisions. It follows thatreference to the UNIDROIT Principles as the law governing thecontract cannot be construed as indicating the parties’ intention toexclude CISG in its entirety; the sole consequence of such referenceis that, within the limits of party autonomy according to Article 6CISG, the UNIDROIT Principles will prevail over any conﬂictingprovision of CISG. CISG, however, will continue to govern theindividual contract as the applicable law; hence all issues peculiarto sales contracts and as such neglected by the UNIDROIT Principles,such as for instance the seller’s liability for defective goods, andthe speciﬁc remedies granted to the buyer, will be governed by CISG,not by the otherwise applicable domestic law, as would be the caseif CISG were to be completely excluded by the parties.26 K. BOELE-WOELKI, “The Principles and Private International Law. The UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law: How to Apply Them to International Contracts”, (1996) Unif. L. Rev. 652, 670.
348 (2002) 36 R.J.T. 335 1. The UNIDROIT Principles as a Means of Interpreting and Supplementing CISG Yet even in cases where the international sales contract isgoverned by CISG, the UNIDROIT Principles may serve an importantpurpose. According to Article 7(1) CISG, “[i]n the interpretation of thisConvention regard is to be had to its international character and tothe need to promote uniformity in its application [...]”, while Article7(2) states that “[q]uestions concerning matters governed by thisConvention which are not expressly settled in it are to be settled inconformity with the general principles on which it is based [...]”27. In the past the principles and criteria for the properinterpretation of CISG have had to be found by the judges andarbitrators on an ad hoc basis. After publication of the U NIDROITPrinciples the question arises whether, and if so, to what extent theycan be used as a means of interpreting and supplementing CISG. Opinions among legal scholars are divided. On the one hand,there are those who categorically deny that CISG can be interpretedon the basis of the UNIDROIT Principles, invoking the ratherformalistic and not necessarily convincing argument that, as thelatter were adopted later in time than the former, they cannot be ofany relevance28. On the other hand, there are those who, perhapstoo enthusiastically, justify the use of the UNIDROIT Principles as ameans of interpreting or supplementing CISG on the mere groundthat they are “general principles of international commercialcontracts”29. The correct solution would appear to lie between these27 Only in the absence of such general principles does the same article permit as a last resort reference to the domestic law applicable by virtue of the rules of private international law.28 See: F. SABOURIN (Quebec), in Michael Joachim BONELL (ed.), A New Approach to International Commercial Contracts: the UNIDROIT Principles of International Commercial Contracts, The Hague, Kluwer Law International, 1999, p. 245.29 See: J. BASEDOW (Germany), in M.J. BONELL (ed.), op. cit., note 28, p. 149 and 150. For a similar view, see: K.-P. BERGER, The Creeping Codiﬁcation of the Lex Mercatoria, The Hague, Kluwer Law International, 1999, p. 182.
UNIDROIT PRINCIPLES AND HARMONISATION OF INTERNATIONAL SALES LAW 349two extreme positions. In other words, there can be little doubt thatin general the UNIDROIT Principles may well be used to interpret orsupplement even pre-existing international instruments such asCISG; on the other hand, in order for individual provisions to beused to ﬁll gaps in CISG, they must be the expression of generalprinciples underlying also CISG30. Among the provisions of the UNIDROIT Principles which mightserve to clarify rather ambiguous provisions of CISG, reference hasbeen made to Article 7.1.4(2), which states that the right to cure isnot precluded by notice of termination, in connection with Article48 CISG; Article 7.1.7(4), which expressly indicates the remediesnot affected by the occurrence of an impediment preventing a partyfrom performance, in connection with Article 79(5) CISG; andArticle 7.3.1(2), which speciﬁes the factors to be taken into accountfor the determination of whether or not there has been a funda-mental breach of contract, in connection with Article 25 CISG31. As to the provision of the U NIDROIT Principles to be used to ﬁllveritable gaps in CISG, reference has been made to Articles 2.15and 2.16 on negotiation in bad faith and breach of a duty ofconﬁdentiality, respectively; Article 6.1.6(1)(a) stating the generalprinciple according to which a monetary obligation is to beperformed at the obligee’s place of business; Articles 6.1.7, 6.1.8and 6.1.9 which provide an answer to the questions, likewise notexpressly settled in CISG, of whether, and if so under whatconditions, the seller is entitled to pay by cheque or by other similarinstruments, or by a funds transfer, and in which currency paymentis to be made; Article 7.4.9(1) and (2) on the time from which the30 See also, for further references: M.J. BONELL, op. cit., note 3, p. 75-82. More recently: F. FERRARI, in Peter SCHLECHTRIEM (ed.), Kommentar zum Einheitlichen UN-Kaufrecht – CISG, 3rd ed., 2000, p. 138 (No. 64); C.W. CANARIS, “Die Stellung der ‘UNIDROIT Principles’ und der ‘Principles of European Contract Law’ im System der Rechtsquellen”, in J. BASEDOW (ed.), Europäische Vertragsrechtsvereinheitlichung und deutsches Recht, Tübingen Mohr Siebeck, 2000, p. 5 et seq., at page 28.31 See also, for further references: M.J. BONELL, op. cit., note 3, p. 76 and 77.
350 (2002) 36 R.J.T. 335right to interest accrues and the rate of interest to be applied; and7.4.12 on the currency in which to assess damages32. Turning to actual practice, it is worth noting that courts andarbitral tribunals have so far generally taken an extremelyfavourable attitude to the UNIDROIT Principles as a means ofinterpreting and supplementing CISG. Signiﬁcantly only in a few cases has recourse to the U NIDROITPrinciples been justiﬁed on the ground that the individualprovisions invoked as gap-ﬁllers could be considered an expressionof general principles underlying also CISG.Thus, in two awards of the International Court of Arbitration of theFederal Chamber of Commerce of Vienna33, the sole arbitratorapplied Article 7.4.9(2) of the UNIDROIT Principles, according to whichthe applicable rate of interest is the average bank short-termlending rate to prime borrowers prevailing at the place for paymentfor the currency of payment, in order to ﬁll the gap in Article 78CISG on the ground that it could be considered an expression of thegeneral principle of full compensation underlying both the UNIDROITPrinciples and CISG. Likewise the Court of Appeal of Grenoble34,in referring to Article 6.1.6 of the UNIDROIT Principles to determineunder CISG the place of performance of the seller’s obligation toreturn the price unduly paid by the buyer, stated that this provisionexpressed in general terms the principle underlying also Article57(1) CISG, i.e. that monetary obligations have to be performed atthe obligee’s place of business. On two other occasions, Article 7.4.9(2) of the U NIDROITPrinciples on the applicable rate of interest was applied with no32 See also, for further references: id., p. 77-82.33 Cf. Schiedsspruche SCH 4318 and SCH 4366 of 15 June 1994: see them published in the original German version in Recht der internationalen Wirtschaft 1995, p. 590 et seq., with note by P. SCHLECHTRIEM (p. 592 et seq.); for an English translation, see: M.J. BONELL (ed.), op. cit., note 2, p. 351-361.34 Cf. Grenoble, 23 October 1996 (for an abstract, see: M.J. BONELL (ed.), op. cit., note 2, p. 411-416.
UNIDROIT PRINCIPLES AND HARMONISATION OF INTERNATIONAL SALES LAW 351further justiﬁcation at all35, or because it was considered “one of thegeneral principles according to Art. 7(2) CISG” (emphasis added)36. Finally, in other cases the Arbitral Tribunal went even furtherby stating in general terms that it would apply “the provisions of[CISG] and its general principles, now contained in the U NIDROITPrinciples [...]”37 or that in applying CISG it was “informative to referto [the UNIDROIT Principles] because they are said to reﬂect a world-wide consensus in most of the basic matters of contract law”(emphasis added)38. The individual provisions of the U NIDROITPrinciples applied in these two cases were Articles 1.8 on usagesand 7.4.8 on mitigation of harm, and Articles 2.17 on mergerclauses, 2.18 on written modiﬁcation clauses and 4.3 on therelevant circumstances in contract interpretation, respectively. 2. UNIDROIT Principles and CISG Side by Side In view of the more comprehensive nature of the UNIDROITPrinciples, parties may well wish to apply them in addition to CISGfor matters not covered therein. To this effect, they may include aclause in the contract which might read as follows:35 Cf. ICC Award No. 8769 of December 1996, ICC International Court of Arbitration Bulletin 75. For a similar approach, see also: ICC Award No. 8908 of 1998, ICC International Court of Arbitration Bulletin 83-87 (at page 87): after having pointed out that “Art. 78 [CISG] […] does not lay down the criteria for calculating the interest” and that “[i]nternational case law presents a wide range of possibilities in this respect”, the Arbitral Tribunal, though without expressly mentioning Art. 7.4.9(2) of the UNIDROIT Principles, concluded that “amongst the criteria adopted in various judgments, the more appropriate appears to be that of the rates generally applied in international trade for the contractual currency […] in concrete terms, since the contractual currency is the dollar the the parties European, the applicable rate is the 3-month LIBOR on the dollar, increased by one percentage point, with effect from the due date not respected up until full payment has been made.”36 Cf. ICC Award No. 8128 of 1995, in J.D.I.1996.1024, note by D. Hasher, 1028; (1997) Unif. L. Rev. 810.37 Cf. ICC Award No. 8817 of December 1997, ICC International Court of Arbitration Bulletin 75-78.38 Cf. ICC Award No. 9117 of March 1998, ICC International Court of Arbitration Bulletin 96-101.
352 (2002) 36 R.J.T. 335 This contract shall be governed by CISG, and with respect to matters not covered by this Convention, by the UNIDROIT Principles of International Commercial Contracts. A similar provision has been included in the InternationalTrade Centre UNCTAD/WTO Model Contract for the InternationalCommercial Sale of Perishable Goods (1999), Art. 14 (“ApplicableRules of Law”) of which states: In so far as any matters are not covered by the foregoing provisions, this Contract is governed by the following, in descending order of precedence: The United Nations Convention on Contracts for the International Sale of Goods; the UNIDROIT Principles of International Commercial Contracts, and for matters not dealt with in the above- mentioned texts, the law applicable at [….] or, in the absence of a choice of law, the law applicable at the Seller’s place of business through which this Contract is to be performed. The difference between the role attributed to the U NIDROITPrinciples under such a clause and the role which, as has beenshown, they may play under Article 7(2) CISG is, at least in theory,clear. Under Article 7(2), the UNIDROIT Principles merely serve to ﬁllin any lacunae to be found in CISG, i.e. to provide a solution for“[q]uestions concerning matters governed by [CISG] which are notexpressly settled in it [...]” and with respect to which recourse todomestic law is permitted only as a last resort. By contrast, byvirtue of a parties’ reference to the UNIDROIT Principles of the kinddescribed above, the latter are intended to apply to matters actuallyoutside the scope of CISG and which otherwise would fall directlywithin the sphere of the applicable domestic law. Given the non-binding nature of the UNIDROIT Principles, theimpact of such a reference is likely to vary according to whether adomestic court or an arbitral tribunal is seized of the case. Domestic courts will tend to consider the parties’ reference tothe UNIDROIT Principles as a mere agreement to incorporate theminto the contract and to determine the law governing that contracton the basis of their own conﬂict-of-law rules39. As a result, theywill apply the UNIDROIT Principles only to the extent that the latterdo not affect the provisions of the proper law from which the partiesmay not derogate. This may be the case, for instance, with the ruleson contracting on the basis of standard terms (cf. Art. 2.19 and39 For more on this point, see: M.J. BONELL, op. cit., note 3, p. 180 et seq.
UNIDROIT PRINCIPLES AND HARMONISATION OF INTERNATIONAL SALES LAW 3532.22) or on public permission requirements (cf. Art. 6.1.14 and6.1.17). On the other hand, the rules relating to validity (cf. Chapter3) or to the court’s intervention in cases of hardship (cf. Art. 6.2.3)will only be applied to the extent that they do not run counter to thecorresponding provisions of the applicable domestic law. The situation is different if the parties agree to submit theirdisputes arising from the contract to arbitration. Arbitrators are notnecessarily bound to base their decision on a particular domesticlaw40. Hence they may well apply the UNIDROIT Principles not merelyas terms incorporated in the contract, but as “rules of law”governing the contract together with CISG irrespective of whetheror not they are consistent with the particular domestic lawotherwise applicable. The only mandatory rules arbitrators maytake into account, also in view of their task of rendering to thelargest possible extent an effective decision capable of enforcement,are those which claim to be applicable irrespective of the lawotherwise governing the contract (“loi d’application nécessaire”). Yetthe application, along with the UNIDROIT Principles, of the mandatoryrules in question will as a rule not give rise to any true conﬂict, giventheir different subject-matter41. * * * The foregoing remarks amply demonstrate that even in thecontext of international sales contracts CISG and the U NIDROITPrinciples are not alternatives but complementary instruments. This is only too evident with respect to international salescontracts lying outside the scope of application of CISG. In suchcases, the UNIDROIT Principles represent a set of internationallyuniform rules which the parties may – and actually increasingly do– choose as the lex contractus, or which arbitral tribunals may – andactually increasingly do – apply as an expression of “generalprinciples of law”, the lex mercatoria or the like.40 See: M.J. BONELL, op. cit., note 3, p. 183 et seq.41 One of the few potential examples of such conﬂict may be where arbitrators have to decide between the law of the place of payment imposing the payment in local currency and the different solution provided for in the UNIDROIT Principles that otherwise governs the contract.
354 (2002) 36 R.J.T. 335 Yet even with respect to international sales contracts governedby CISG, the UNIDROIT Principles may play an important role. In theabsence of an express reference by the parties, they may be – andactually increasingly are being – used, though not indiscriminately,as a means of interpreting or supplementing CISG. In the presenceof an express reference by the parties, the UNIDROIT Principles maymoreover apply to matters outside the scope of CISG and whichotherwise would fall within the sphere of the applicable domesticlaw. In conclusion it may well be said that both CISG and theUNIDROIT Principles are the right instruments at the right time: eachone has its own raison d’être.